4th Year Medical Students: What You Need to Know About Income Protection Before You Graduate!

By: Chris Wimbly of The Disability Doc

As a 4th year medical student, you are within months of celebrating a major accomplishment in your life. Years of sleepless nights and cram sessions will finally start paying off. Congratulations!

In the next couple months, you will be transitioning from student to trainee. And, finally, you will be earning an income. Granted, it is a relatively low income compared to what you will be bringing in once you are an attending physician, but nonetheless, it is revenue.

As a student, you may have attended some sort of financial seminar. You’ve likely been informed of the value of emergency savings, managing debts, planning for long-term savings, and disability insurance. If you have not attended one of these financial sessions yet, as a resident you will undoubtedly have financial advisors showing up at your residency program ready to give you advice and even recommending certain products or strategies.

When it comes to disability insurance, here are five things you need to be aware of before you graduate medical school:

1) Rates and Discounts

Disability insurance rates are based on your age and health when you initially apply and then are locked in for your entire medical career. Getting a policy while you are still a student will ensure that you get the best “age rating” possible.

Also, with disability insurance, it is important that you obtain the right discount on your plan so you can save money in premium. Having a good discount on your policy can literally save you tens of thousands of dollars over the life of your medical career.

The best discounts are available through your medical university and/or residency training program. Roughly 80% of all medical universities and residency programs have discounts available. If you are graduating from a medical school that has a discount but will be attending a residency program that does not, then you should absolutely get a policy before you graduate. If your upcoming residency program does have a discount setup, then you need to confirm which option has the optimal discount.

If it sounds like a lot of work, it’s not. An experienced insurance agent can easily offer you a side by side comparison of all discounts available through your current school as well as your upcoming matched program to determine which will provide the deepest discount and best benefits. This is especially important if you are a female because if “unisex” rates are available, it could save you close to 40% in premiums.

Choosing not to evaluate all your options before you graduate, can end up costing you significantly in higher priced premiums or even losing the opportunity to apply. The stats on injuries, illnesses and unlucky needle sticks during residency are shocking. Many residents have found themselves uninsurable because they waited until it was too late to secure a plan.

2) Graded Premiums

Most insurance carriers offer two options for paying your premiums:

1. Graded
2. Fixed (AKA “level” premiums)

Graded premiums start low initially and increase each year. This option is commonly selected by medical students and residents to keep the costs as low as possible in the beginning (during the “tough” years when income is the lowest). Then, once you are attending and your income increases, you can convert your policy from graded premiums to fixed premiums to save you money over the span of your career.

Fixed rates never change. They stay the same throughout your career. While this option costs a little more initially, it will yield you the most savings throughout your career.

3) Future Increase Riders

As a graduating medical student, you can apply for an initial benefit of anywhere between $500 and $5,000 in monthly benefit (depending on the carrier). Some students opt for the higher benefit amount to lock in as much coverage as possible at the youngest age rating possible. This is a wonderful option if you have the budget to do so.

However, many students opt to start with a much lower benefit amount initially (say $1,000 per month for example). This keeps the cost affordable during training. And, if your plan has a “future increase” rider, you can easily increase your benefits later once your income allows.

Whether you start with a lower or higher benefit amount initially, a “future increase rider” is an essential component of your plan. This rider locks in your health at the time you initially apply. So, when it’s time to increase your benefits later, you will not have to go through any health questioning…and a negative health event would not prevent you from obtaining additional coverage.

4) Student Loan Riders

It’s no hidden secret that medical students carry one of the highest student loan balances of any profession in the world. It’s critical that you protect yourself from this massive burden in the event you become ill or are injured and cannot generate an income. A few carriers offer a “student loan protection rider” for a small additional cost, and it is well worth looking into. (#LifeofaMedStudent note: A few student loan refinancers are beginning to offer death AND disability protection in their products, something worth considering when looking if you need student loan riders).

5) Inflation Protection

The Cost of Living Adjustment Rider (also known as “COLA”) protects your benefits from inflation. If you look at any 20 or 30-year snapshot of time, you will see that costs always rise. Housing prices go up, gas prices increase, and groceries don’t cost the same as what they used to.

A COLA rider is designed to isolate your benefits from being gobbled up by inflation. For example, if you have the COLA rider on your plan, and you become disabled, your benefits would increase each year to keep up with inflation.

Roughly 50% of all disability policies purchased by students and residents contain the COLA rider. The younger you are in your career, the more necessary this rider is. The older you are, the less time there is for this rider to be as impactful. One good strategy is to select this rider initially, and then once you are further along in your career, drop the rider from your plan to reduce premiums at that time.

As you can see, there are a lot of choices to make regarding income protection. It’s imperative that you reach out to a trusted agent before graduating to secure the best discounts available in the market. Playing the “discount game” correctly will save you significantly, and a knowledgeable agent will help you lock in the ideal plan so that you don’t have to keep re-examining your options again and again down the road. As long as you pay the premiums, the policy will remain in place, protecting your income and securing your future.

Congratulations once again! – Chris Wimbly, The Disability Doc

Disclosure: Chris at The Disability Doc is a paid sponsor of #LifeofaMedStudent. I’m a huge proponent of disability insurance and personally have maxed out my policies to my income both as a resident, and now as an attending. There is no justification for not getting adequate disability insurance when you work so hard, endure so many years of expensive training, and have decades of high income ahead of you. The only problem is the stuff is complicated and you need to purchase it from someone you trust. You can read more about Chris and The Disability Doc in his other Sponsor post: What You Need to know about Your Disability Insurance Agent

The Disability Doc:

I am passionate about helping individuals protect their assets, incomes, and lifestyles. This is why I started The Disability Doc. I wanted to bring something fresh and meaningful to the table! Also, I am a big fan of integrating today’s technology into the process of selecting a plan to make the process as smooth and efficient as possible.

At The Disability Doc, our mission is to make the complex simple by working on your behalf to narrow down your options and create a plan specifically designed for your personal needs. We are a small team of dedicated professionals who do not work for any carrier—meaning you will never be “sold” a run of the mill policy and will never be just a “number.” With years of income protection experience, we have helped hundreds of medical professionals simplify the process of choosing a carrier that has strong financial ratings, solid plan provisions, trustworthy contract language and the best discounts available nationwide. You can feel confident knowing your policy is tailor-made to secure your financial future. For more details visit thedisabilitydoc.com. Let’s build a plan together!